Credit Reporting and Debt Collection

Last week I tried to talk about the various experts involved in debt collection and credit counselling. You know what? I forgot all about credit reporting agencies, otherwise known as Credit Bureaus.

It’s perfectly understandable because credit bureaus don’t collect debts. What they do is report an awful lot of personal and confidential information about people to a lot of people. In a credit society

creditors and lenders play a huge role in our personal lives (and provide a pivotal financial backbone for business and commerce.) No personal information is more important than our financial information. This is why governments have legislation to make sure that the information is correct information because it is so potentially harmful if you have a bad report.

The credit report records how well you pay your debts, or in industry vernacular, maintain your obligations and manage your money. If used properly, the credit report helps protect the integrity of the credit system. It assists lenders in making a decision about who to lend money to and how much. It warns lenders about those who miss their payments and other high risk debtors. In other words, it’s a commercial tool to facilitate good business decisions.

The credit report is also the most powerful collection tool of all. People with poor credit histories are often highly motivated to pay even if the information is inaccurate, or in many cases, the debt is not even owing. I recall a recent situation where a client did not know about an R9 (the worst rating of all) on his credit file until he and his wife had almost finished purchasing a house and obtaining a mortgage. It was an old debt – around or over 6 years old that he had disputed for $1,700. He heard nothing more about it until this very critical moment. He had to pay it to get the mortgage.

I applaud the recent BC Supreme Court decision upholding action taken by Consumer Protection BC to stop one of Canada’s largest Credit Reporting Agencies, Trans Union, from reporting on debts that are over 6 years old. The Business Practices and Consumer Protection Act prevents reporting agencies from including information detrimental to an individual on their credit report for longer than six years in British Columbia.

The limitation period was changed last year from 6 years to 2 years. Creditors have two years to pursue debtors in a court of law in British Columbia.

Consumer Protection BC encourages consumers to:

Request a free copy of your credit report from both Equifax and TransUnion on an annual basis;

Check your report carefully for the type of information included and the length of time the information has been on your report;

Contact the credit reporting company if you have any concerns;

If you are unable to resolve issues with the credit reporting company, visit Consumer Protection BC’s online dispute resolution platform at www.resolveyourdispute.ca